Last year hit home health agencies with a cash flow triple whammy. First, the Patient-Driven Groupings Model (PDGM) took effect January 1, and cut billing periods in half, from 60 days to 30, leaving agencies tight on cash flow for the first few months under the new payment model.
Next, Centers for Medicare & Medicaid Services (CMS) began its phase out of pre-payments — or Requests for Anticipated Payments (RAPs), a vital tool for smaller providers in managing their cash flows and payrolls.
Then in March, the COVID-19 pandemic hit, throwing everything for a loop, and leading to negative cash flow early in the year.
That challenging landscape is certainly much better today, but challenges remain for agencies managing their cash flow. Here is a look at three major pitfalls agencies must navigate — and three tips and tricks to do so.
3 pitfalls facing cash flow management
Pitfall #1: No-payment RAPs means no cash up front
With the shift to no-payment RAPs, agencies up-front cash flow has taken a major blow.
“We went from 60% payment up front in 2019 to 20% in 2020, and now we’re getting no money up front,” says Robert Simione, principal at SimiTree Healthcare Consulting. “If you take a 6-day RAP penalty on a claim, you’re talking about a 20% reduction in payment, so you’re making no money off Medicare, which is really the only payer that typically has profit margins in the industry.”
It’s important just from a cash standpoint for two reasons: one, you’re not getting anything up front anymore, and two, if you do get penalized, you’re at risk of losing at minimum 20% of your payment. And it’s just going to get harder with the notice of acceptance that’s potentially coming about in 2022.
Pitfall #2: Increase in managed care
With the increase of managed care, managing cash flow becomes more challenging because of delayed payments, requiring agencies to take on more work both up front and on the backend to secure the claim.
“Patients are constantly changing payers, which creates increased work in terms of operation,” Simione says. “There is a lot more work involved, with a lot more complexity.”
That includes on the billing side, where managed care groups want to operate like Medicare, says Kimberly Chapman, director of revenue cycle outsourcing at SimiTree.
“However, they’re following their own rules, and that’s where some of the issue lies: agencies just have to make sure that everything is handled up front in order to bill correctly.”
Pitfall #3: Medicare claim issues
More than any year in the past, 2021 has seen a multitude of Medicare claims issues, Simione says — at times up to 15 to 20.
“Some of these can be processing information wrong on their end, or they can be incorrect payments that have gone out to providers,” he says. “We’ve seen a great deal of these recently. It’s important for agencies to stay on top of it, because what you don’t want to do is continue to work if they’re just not there.”
Agencies also don’t know how claims might be adjusted down the line, which can alter their cash flow.
“The challenge is being able to keep up with them and identify through the AR exactly what the issue is,” Chapman says. “For example, with the new regulation, Medicare was not ready to pay the new 2021 rate. So we saw claims from December into January paying the old rate.”
3 tips and tricks for improving cash flow
These three pitfalls are just the tip of the iceberg for agencies, Chapman says. To handle them, agency heads should follow these three tricks.
Tip #1: Communicate between clinical operations and revenue cycle
Simione and Chapman view communication at the top of the list of important items to improve cash flow, starting at intake.
“Insurance is more complex,” Simione says. “There’s not just one Blue Cross Blue Shield plan now — there are five or six different plans that you have to sort through. So you have to make sure that you have the right information to be able to process that insurance up front, because that creates your cash flow downstream.”
In other words, agencies must know the correct information to gather for making claims later, and that requires communication between clinical ops and revenue cycle. Having the right information also ensures that you have the right physician.
“If you don’t have the right physician, then you’re typically already 15 to 20 days behind, maybe even more, by the time that order gets to your processing department,” Simione says.
Tip #2: Optimize your EMR
To keep cash flow robust, technology is essential. This starts with the electronic medical record (EMR) which must be optimized and updated properly. Payers and payment rates must be set up correctly within the system, and communication must be facilitate between operations and billing.
“There might be an insurance note that there’s a payment change, for example, so making sure that’s done and documented in the EMR is a must,” Simione says.
Additionally, the more work that is actually being done within the system, the better.
“If things are done in email and spreadsheets and on a piece of paper on someone’s desk, you’re not going to optimize your billing because people are going to come and have to take their eyes off of the workstream by leaving the system,” he says. “And at the end of the day, if you send a claim out and it gets denied, if you have all of your documentation in one place, you have a better chance of appealing it.”
Ultimately you want the EMR to work for you, and there are so many different clearance houses with so many different capabilities. Once the claim goes from the EMR into any clearing house, these are great tools for combatting up-front rejections.
Tip #3: Keep abreast of Medicare issues and updates
Medicare changes so frequently with regards to billing, and so much complexity with each major change, that agencies must be proactive in keeping up on what’s new and what’s next, Simione says. There are two reasons why. First, the changes to Medicare have a tangible impact on an agency’s operations and billing.
“Second, if there’s a change to Medicare, there is a potential down the line that managed care organizations will follow suit,” he says.
Agencies must also track Medicare to monitor any issues that arise as a result of these changes.
“It’s really important that you’re up to date and following some of the state and national associations out there that can provide context,” he says. “There is so much work to be done, so you don’t want issues that could be resolved.”
This article is sponsored by SimiTree Healthcare Consulting, the newly formed company that combines Simione Healthcare Consultants and BlackTree Healthcare Consulting. To learn more about how to achieve stronger financial performance, call 800.949.0388.
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